I'm a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and Techcentralstation. I've also ghosted pieces for several UK politicians in many of the UK papers, including the Daily Sport.

This is one of the petty annoyances of actually knowing what you’re talking about on any specific subject. Finding people who aren’t as specialist as you are making a hash of a claim in your field. So here’s today’s petty annoyance for me:

The pint-sized – in astronomical terms – asteroid that’s scheduled to buzz the Earth this Friday may have a street space value of about $195bn.

“Unfortunately, the path of asteroid 2012 DA14 is tilted relative to Earth, requiring too much energy to chase it down for mining,” say the wannabe space prospectors at Deep Space Industries (DSI), undoubtedly disappointed to watch that $195bn sail back off into space.

No. The value of any lump of rock is not the value of the metals trapped within it. It is the value of those trapped metals minus the cost of untrapping them. Thus that calculation of value by Deep Space Industries is simply wrong.

So, for example, a mountain of iron ore out in the Australian Outback is not worth the same as that same tonnage of iron ore sitting outside a steel plant in China. We must subtract the costs of tearing the mountain apart, grading the ore, building a railroad to the coast for it, the cost of the ships to transport it to China and, crucially, the cost of the finance to do all of this.

Similarly, those reports from a few years ago that Afghanistan has a trillion dollars worth of lithium, or copper, out there in the boonies. No, it doesn’t. We must calculate the cost of extracting and refining it which, in that part of the world at least, would presumably include a fairly serious security bill.

It’s the same with our asteroid. That $195 billion value rests upon two assumptions. The first, that there are no costs associated with going up there and mining it. The second, they are assuming the value of those materials in space, not the value down here. And they are calculating that value by taking the price on Earth and then adding the cost of boosting it into space.

Hmm.

On the first point, the costs of actually mining that asteroid. Well, at present, no one can actually do that. It’s simply not possible. Thus the price of mining it is infinite. $195 billion minus infinity is less than nothing.

On the second point, well, no one is able to make use of those products up in space at present, there just is no market at all. So even if point one fails, the value is still zero for that asteroid: for there just ain’t no one to buy it.

A useful little guide to the metals and minerals business for you. There’s dirt and there’s ore. Ore is where the things that you can extract from the dirt are worth more than the cost of extracting them. At our current level of technology asteroids are dirt, not ore.

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No, “value” is not mathematical. It is what a buyer is willing to pay a seller.

Or it is worth sales price minus cost of acquisition…… and sales price is based on a subjective judgement made by both buyer and seller, assuming both are fully informed.

“fully informed” is the key, there I think. My antique watch that I got from my grandfather is of little $ value to me. But an antique jeweler told me he could sell it for $2000. Is it “worth $2000?” Not to the dealer, he offered me $1200. To a buyer, perhaps.

Okay, sure. but again, that has nothing to do with the cost to get the material, and then sell it.

Let’s presume the ‘value’ quoted was vetted agains what that estimated material is selling for (what ppl are willing to pay) at current market prices. That value doesn’t change because I pay to send an expensive rocket after it…

Even if it costs $1T to mine and sell a $1T asteroid, you’ve spend $1T on infrastructure, staff (who gain experience as they continue with the company) and expenses to do so and presumably some of the infrastructure and (now experienced) staff will still be there for the next round of mining ventures, making the cost less and less each time. Eventually the venture will start to create a profit.

Most small businesses do not last past the 7 month point, usually because they don’t have enough startup capital to survive until the transition point where the company becomes profitable.

This article reminds me of some quotes from the past: “That is the biggest fool thing we have ever done. The bomb will never go off, and I speak as an expert in explosives.” – Admiral William Leahy. [Advice to President Truman, when asked his opinion of the atomic bomb project.]

So called experts in this case the author of this article trying to quantify how difficult it will be do space mining when his only experience is with terrestrial mining. There will be many difficulties ahead but dismissing the idea as ridiculous is in itself ridiculous. It appears that the orbital dynamics of retrieving the asteroid is more difficult than anticipated but Deep Space Industries has admitted it and didn’t hide the fact. This should be to their credit…time will tell whether this is wrong or not. History says lets keep and open mind, but not so open that our brain falls out.

This article is a bit disingenuous. Of course we don’t have the capability to mine this asteroid as it whizzes past, nor do we have facilities in place which could use those materials, but now is exactly the right time to start thinking about such things.

With private companies starting to take the lead in near-space activities, it seems likely that A) mining for materials in space will become, not just possible, but necessary in the not-too-distant future, and B) there will be a market for those materials.

With the rise of 3D ‘printing’ technology, this entire prospect has become much more feasible. We won’t need a lot of specialized manufacturing equipment already in place in order to make use of materials mined from asteroids or the moon. A space-based economy will necessarily start small and grow slowly and organically, but it makes much more sense than mining and using materials on earth only to waste resources and energy to send them out of the gravity well for use in space.

3D printers by themselves can’t bootstrap an industrial capacity, but a “Seed Factory” that includes a number of different machines can. You need chemical processing to extract metals and other products from the raw rock, casting and machining and 3D printing to build up parts, solar array or solar furnace as an energy source, etc.

With the right starter set, you can begin growing your capacity by making more kinds of equipment in a widening range.

This is a stupid article. Every mining operation speaks of the worth of the commodity in the ground because there is a difference between what the commodity is worth and what your profit will be after mining it. The cost of mining it is vastly different depending on the company and location of the mine, so it doesn’t make any sense at all when speaking about the value of the commodity to speak of the profit, or even the NPV of the profit. This allows comparison of finds across companies. Profit is of value only to the shareholders not the general public. There are gold companies that can mine gold for $400 an oz and other that do it for $1000. But if there is $1 billion of gold in the ground, it’s worth $1 billion. Period. If it costs you $1.2 billion to get it out, then leave it there. If it costs $800 million, then go get it. Neither of those circumstances changes the fact that when you sell all of the gold you’ll get $1 billion, because that’s what it is worth.

Same goes for Asteroid mining. In a mining context it makes perfect sense to speak of the value of the asteroid in terms of the value of the minerals it contains. The profit to be obtained mining it is another subject dependent on the cost of capital, labor, environmental regulations, etc. But is has no effect on the value of the rock.